FOR RETIRING FARMERS AND THEIR FAMILIES

Leasing your farm when you retire: how a flexible lease works

Leasing is the simplest way to stop the heavy work and keep your land.

Another farmer leases the farm from you and pays you rent. They do the farming. The farm stays yours, and if you choose well, someone local is looking after it.

It comes first among the seven options in the free Ageing on Farm guide, and it's the simplest. It can also fall apart if the rent is wrong.

Why a flat rent can fall over

Lease payments have usually been set as a standard percentage of the land's value each year. On a valuable property, that adds up to a big yearly cost for the farmer leasing it.

With land prices rising faster than farm incomes, a flat rate can be more than they can carry, especially in a tough season. If they can't pay, the arrangement falls apart.

How a flexible lease shares the seasons

A flexible lease sets a lower base rent, then adds a share of the farm's operating profit on top.

In a good year, you might earn more than a flat lease would pay. In a bad year, the farmer isn't crushed by a payment they can't meet.

You both carry the seasonal risk. That's fairer, and it makes the lease more likely to last.

You can still live in the house

Staying on is something you negotiate. For some farmers, it's the whole point: someone else working the paddocks, and you still at home.

Settle it in writing before the lease starts, along with everything else.

Settle the terms at the start

A good lease comes down to getting the terms right at the beginning. Work through these:

• How long is the lease?
• What happens at the end?
• Who pays for maintenance?
• What if the leaseholder wants to make improvements?

All of it should be in writing, drafted by a lawyer who understands agricultural leases.

The benefits

• The land stays fully yours.
• You get the rent, without the physical work. With a flexible lease, it moves with the season.
• It's fairly simple to set up, with the right legal agreement.
• Staying in the house can be part of the agreement.
• The leaseholder brings fresh energy, and potentially new ideas, to the operation.

The drawbacks

• The leaseholder gains little from improvements that pay off over many years, like soil health or infrastructure, because the land isn't theirs.
• With a flat rate lease, the tenant carries all the seasonal and production risk, which can lead to corners being cut.
• A lease puts off the succession question rather than answering it. Once it ends, the question is back on the table.
• Without spending on maintenance and improvement, the farm can lose value over time.
• Finding a good leaseholder takes time and trust.

Use the time a lease gives you

A lease gives you time. It doesn't decide the farm's future, so use the years it buys you to work that out.

The full guide, Ageing on Farm, is free at cultivatefarms.com/resources.

You can build your own plan at cultivatefarms.com/plan.